Department of Water and Power

City of Los Angeles

City of Los Angeles
4th Regional Investors Conference
March 19, 2018
 LADWP Overview
• Largest municipal utility in the US
• 1.5 million power customers; 680,000 water customers
• Vertically integrated utility
• Owns more than 25% of state’s transmission; not part
of California ISO
• Reached 20% renewables in 2010; well-positioned to
meet state-mandated level of 33% by 2020
• Diverse water resources; expanding local water supply
• Economically strong and diverse service territory
• Stable, broad customer base with steady growth
• Largest 10 customers provide 10.5% of Power
revenues and 6.5% of Water revenues
• Approved multi-year rate increases provide favorable
rate restructuring

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Key Figures – FY 2017
• Sales:
− Energy Sales: 24 million MWh
− Water Sales: 196 million HCF
• Operating Revenue:
− Energy: $3.7 billion
− Water: $1.1 billion
• Total Liquidity as of December 31, 2017:
‒ Power: $1.93 billion on hand including
~$458 million on deposit in a Debt Reduction Trust Fund
and $100 million in Rate Stabilization Fund
‒ Water: $503 million on hand including $50.2 million in
Expense Stabilization Fund
• Combined $500 million revolving line of credit for both
Water & Power Systems

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Note: Power System Service Map
Existing LADWP Governance
General Manager
- Administers Department affairs and operations
Mayor City Council Energy, Climate Change and Environmental
Justice Committee
- City Council Committee with jurisdiction
Energy, Climate of matters concerning the Department
Change & City Council
Environmental - Approves rate requests and selection of
Justice Committee Board of Water & Power Commissioners
and General Manager
Board of Water and Board of Water and Power Commissioners
Power Commissioners Office of - Five-member Board establishes policy for
Public the Department. Members appointed by
Accountability Mayor and confirmed by City Council for
five-year terms
David Wright
General Manager
Office of Public Accountability
- Executive Director is appointed by a citizens
committee, subject to confirmation by
City Council and Mayor
- Provides public, independent analysis to the
Board and City Council
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LADWP’s Transformation

• Replace aging infrastructure

• Transition to 100% clean energy

• Protect from drought, expand local water

supplies, groundwater cleanup and storage

• Electrify transportation sector

• Improve customer service, keep rates

competitive

• Expand customer-facing automation

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Snapshot of Just a Few Challenges Ahead
(Legal Mandates)
Power Water
• State Mandated Green House Gas Reduction • Cover all Remaining Open Reservoirs (Long
(AB 32, SB32 & AB197)
Term 2 Enhanced Surface Water Treatment
• Eliminate Once Through Cooling of all Coastal
Power Plants (Clean Water Act – Rule 316b) Rule)
• South Coast Air Quality Management District • Convert Chlorine to Chloramines (Stage 2
Emission Reduction Mandates (NOx, SOx, PM, Disinfectants and Disinfection Byproducts
etc)
Rule)
• Solar Incentive and FiT Programs (SB 1 & SB
1332) • Owens Lake Dust Mitigation (Clean Air Act)
• Divestiture of Coal Resources (SB 1368) • Mayor’s Executive Directive No. 5
• Increase Renewable Resources (SB 350: 20%
-2010 / 25% 2016 / 33% - 2020 / 50%-2030) -Reduce imported water purchases by 50%
• Cost Effective Energy Storage (AB 2514 & AB by 2025
2227 & SB801) -Expand local water sources to account for
• Minimize Risk of Catastrophic Wildfire (SB at least 50% by 2035
1028)
• Federal Solar Tariff
• Bio Energy Projects (SB 859)
• City Council 100% Clean Energy Motion

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Revenue Composition
Under New Rate Structure
Power System Water System
49% Pass-Through 63% Pass-Through
RCA**
ESA** 5%
1%

Total Other Pass

Throughs**
30% Base Rate*
37%
Base Rate*
ECAF Charges** 51%
43%

Water Supply
Adjustment Factor**
27%
Automatic Pass-
Throughs**
6%
* Decoupled Base Revenue
** Pass-Through Costs

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 Rates Remain Competitive: Residential
Power System
Sources: https://www.sce.com/wps/portal/home/regulatory/tariff-books/rates-pricing-
choices;
http://www.sdge.com/rates-regulations/current-and-effective-tariffs/current-and-effective-
tariffs;
http://www.burbankwaterandpower.com/electric/residential-electric-rates-and-charges;
http://www.glendaleca.gov/government/city-departments/glendale-water-and-power/rates;
http://cityofpasadena.net/waterandpower/electric-rates/ :
https://www.pge.com/tariffs/assets/pdf/tariffbook/ELEC_SCHEDS_E-1.pdf
:https://www.smud.org/en/Rate-Information/Residential-Rates
Rates at other utilities subject to change
Water System
Sources: http://www.ebmud.com/customers/billing-questions/rates-and-charges/;
https://www.sandiego.gov/water/rates/rates;
http://www.gswater.com/simi-valley/download/rates_accountability/SI-1-R.pdf;
http://www.gswater.com/sanabriel/download/rates_accountability/R3-1-R.pdf;
https://sjwater.s3.amazonaws.com/files/documents/Schedule%201%20Jan%209%202018.
pdf; http://sfwater.org/modules/showdocument.aspx?documentid=7742
https://www.santabarbaraca.gov/gov/depts/pw/resources/rates/wtrsewer/changes.asp
Rates at other utilities subject to change
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Power System

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 Diverse Generation Mix
Diverse mix of resources, declining use of coal with net dependable capacity of 120% of peak demand

Department Owned Facilities1 Jointly Owned Facilities and Contracted Capacity Rights1
Net Dependable Net Dependable
Type of Fuel Facilities (MWs) (%)2 Type of Fuel Facilities (MWs) (%)2
Natural Gas 4 3,319 42.4% Coal (IPP) 1 1,202 15.3%
Large Hydro 1 1,175 15.0% Natural Gas (Apex) 1 480 6.1%
Renewables 39 285 3.6% Hydro (Hoover) 1 304 3.9%
Nuclear (PVNGS) 1 380 4.8%
Renewables/DG 32,329 693 8.9%
Total 44 4,779 61.0% Total 32,333 3,059 39.0%
 Net maximum plant capacity of 9,890 MWs and net dependable
LADWP Transmission System
capacity of 7,794 MWs1
 Peak demand of 6,502 MWs (August 31, 2017)

 Capacity allows minimal exposure to uncertain markets to meet

customer demand

 Base load generation is fueled by various sources

 Extensive transmission network
• The Department owns and operates in excess of 25% of the
transmission facilities in the State (over 19,840 miles)
• Department serves as operating agent for:
• Pacific DC Intertie (co-owner)
• Southern Transmission System (contract capacity rights)
• Mead-Adelanto Transmission Project (co-owner), and
• Certain Navajo-McCullough facilities (co-owner)

_______________________________________________________
1. As of January 31, 2018, excludes DWR ‘s 120 MW share of net maximum capacity and 44 MW share of net dependable capacity.
2. As a percentage of all facilities. May not add due to rounding.
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 Managing Regulatory Mandates
Long-term planning has resulted in cost-effective strategies

 Renewable targets: Strong existing base of renewables, supplying 29% of 2016 energy needs
• Have met RPS targets to date
• Approximately $1.0 billion capital spending anticipated over the next five years for Renewable Portfolio Standard
• Expect to reach 33% Renewable Portfolio Standard by adding approximately 300 MW of new renewables by 2020 through a
competitive selection process
 Eliminating coal: Either have divested from or have contracts in place to eliminate coal by 2026
• The 2016 divestiture of the Department’s interest in the Navajo plant reduced reliance on coal and cut greenhouse gas emissions
• IPP, which currently contracts 44.6% of its capacity to LADWP, has amended its Power Sales Contract to replace its coal units with
combined cycle natural gas units by July 2025
 Modernizing Coastal Generation Fleet: Eliminating once-through ocean (OTC) cooling
• Repowering is currently on hold while LADWP conducts an OTC Study to provide a comprehensive reliability assessment to
determine whether viable alternative hybrid clean energy solutions exist to maintain reliability
Forecasted RPS Generation1

_______________________________________________________
1. Source: Los Angeles Department of Water and Power, 2016 Power Integrated Resource Plan (Appendix N)
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 Five-Year Capital Improvement Plan (CIP):
$7.83 Billion
Expected Funding Source ($millions)

Power System
$ In Millions $1,393 $1,673 $1,637 $1,466 $1,661
Reliability Program 1,800
Renewable Portfolio
$948 Standard 611
12% 817 850
1,200 445* 625
$854 Power Integrated
11% $2,686 Resource Plan
34%
Various Generation
Station Improvements 600 1,062
$1,627 948 820 841 811
21% Energy Efficiency
$1,003
$712 13% -
9% Shared Services: IT, 2018 2019 2020 2021 2022
Facilities, Customer
Services, Fleet Internally Generated Funds External/Debt Financing

Driven by the Power IRP, developed in conjunction with

strategic plan goals: Of $7.8 billion five-year CIP, $4.5 billion (57%) is
cash funded and $3.5 billion (43%) is debt funded
 Safe and reliable electric service
Board-adopted planning criteria targets maintaining
 Cost competitive debt-to-capitalization ratio of less than 68%

 Environmental stewardship 11
*Includes the Power 2017 Series C Revenue Bonds
 Financial Overview – Power System
Strong Operating Results & Financial Metrics
Debt Service Coverage (Min 2.25x) Days Cash on Hand (Min 170 days)*
3.00 300

250
2.50
200
2.00 150

1.50 100

50
1.00
2012 2013 2014 2015 2016 2017 0
2012 2013 2014 2015 2016 2017

Full Obligation Ratio (Min 1.7x) Debt to Capitalization Ratio (Max 68%)
2.00 70%

1.75
1.50 65%
1.25
1.00 60%
0.75
0.50 55%
0.25
- 50%
2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017

Prior to FY 2016, the Board Approved Financial Metric for Minimum Cash on Hand was $300 million.
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Conservative Debt Profile
Power System Debt Repayment Profile* Debt Composition

• $9.074 billion outstanding (including $200 million CP)

payable from the Power Revenue Fund
*Debt repayment profile excludes $200 million commercial paper.
• 83% of debt portfolio is long-term, fixed-rate bonds.
Power System Credit Ratings as of March 15, 2018 • 17% is a combination of VRDOs supported by bank
Bond Ratings Long-Term Outlook facilities with staggered maturities, direct purchase,
Standard & Poor's AA Stable commercial paper, and a fixed rate note.
Moody's Investors Service Aa2 Stable • No interest rate swaps or auction rate securities;
Fitch Ratings AA Stable

_______________________________________________________________________________________________ 13
Note: Debt outstanding As of January 1, 2018. Excludes interest subsidy for BABs and CREBs/QECBs.
Water System

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 LADWP Is Nation’s 2nd Largest Municipal Water Utility

LADWP provides water service to the second most populous city in the U.S.
~4 million residents in 2017; 473 square miles
 Water System revenues of ~$1.12 billion in FY 2017
— $418.0 million of operating income before depreciation
 Diverse and stable customer base
— Broad-based economy
— Top 25 non-governmental employers in LA County comprise about 6.4% of labor force
— LA County per capita income is above national average
 Commitment to maintaining affordable rates

Water System FYE 2017 Sales Water System Customers

(Millions of Billing Units of 100 cu. Ft.) Average Number of Customers
Other Year Ending June 30 2017 2017 (%)
17.2
8.8% Multiple
Dwelling
Single-Family Residential 487,000 71.6%
Units
61.2 Multiple Dwelling Units 121,000 17.8%
Total Sales Single 31.2%
FYE 2017: Family Commercial and Industrial 65,000 9.6%
196 M of Residential
billing units of 72.6 Other 7,000 1.0%
100 CF 37% Commercial
Total 680,000 100.0%
& Industrial
45
23%

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Source: Department of Water and Power of the City of Los Angeles
Water System’s Goals
Commitment to Financial Stability
 Management & Board-adopted financial metrics
 Strong cash balances
 Consistently strong debt service coverage
Maintain Diverse Mix of Water Sources
 Maintain sources from Los Angeles Aqueduct and
Metropolitan Water District of Southern California
 Increased use of recycled water
 Clean-up and expand use of groundwater
Maintain Competitive Rates
 Cost adjustment factors designed to recover certain
costs
 Utilize rate increases as appropriate
 Commitment to maintaining affordable rates
Sound Asset Management Principles
 Maintain and upgrade infrastructure
 Ensure future reliability
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 Water System Draws From Diverse
Water Resources Across the State
Water Rights
(OV and
Mono Basin,
Sierra Nevada included in
Mountains Increased LAA System)
Recycled MWD
Water Use (43.3% of FY
Delta (1.6% of FY 2017 Supply)
Los Angeles 2017 Supply)
Aqueduct
Integration
of supply,
130 treatment, storage,
Colorado River transmission & 370-mile
Reservoirs
Aqueduct and Tanks; distribution LAA System
~313,000 AF operations (45.0% of
of storage FY 17 Supply)

State Water Project Own Local

7,288 miles of Groundwater
distribution Entitlements
pipeline (10.1% of
Local Groundwater, Water FY 17 Supply)
Recycling, and Conservation

_______________________________________________________
Source: Supply data based on unaudited FYE 2017 results
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 Long-Term Strategy to Diversify Water Supply Mix
Groundwater  Groundwater Clean-Up
clean-up and  Stormwater Capture Master Plan
local water
— Master Plan completed in 2015
supply projects
expected to — Additional 68,000 to 114,000 AFY captured over the next 20 years
reduce  Recycled Water Projects
expensive — Augment water supply by 59,000 AFY by 2035
MWD water
Water Supply
purchases by FY 2013-2017 Average
Water Supply
2025 Target
50% Recycled (Sustainable City pLAn)
2%

Groundwater
13% Other MWD
26% 24%
LA
Aqueduct
19% MWD Local
66% Sources,
Including
Storm Water
Capture
50%
_______________________________________________________
Source: Department of Water and Power of the City of Los Angeles
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 Water Conservation
 Meeting
Mayor’s
goals

 State
conservation
targets

 Long-term
view of
water use
Focus on Infrastructure Replacement
LADWP has implemented an asset management program to address the long-term sustainability of its
major facilities and infrastructure.
Focused on projects necessary to: Focused on diversifying funding sources:
 Protect existing water supplies  Internally generated funds
 Comply with increasing water quality standards  Revenue bonds
 Expand and upgrade the distribution system  CA State Water Resources Control Board
 Develop new water resources
Summary of Capital Improvements
Major Components Include: Expected Funding Sources
Other ($6.6 billion over 5 Years)
Infrastructure and
Operational
Support 2,000 $1,637 $1,651
7% $1,354
Safe Drinking - -
Water Program 1,500
25%
$861 $1,079 -
- 1,064 1,073
Water System 1,000 895
Infrastructure -
231 644
Program Owens Valley - - -
38% Regulatory 500 - -
Program 630 459 573 578
435
13%
-
Local Water FY 2018 (1) 2019 2020 2021 2022
Supply Program
18% Internally Generated Funds External/Debt Financing1
_______________________________________________________
1. Consists of a portion of the proceeds of the 2018 Series A Bonds, a portion of previously issued Bonds, proceeds of additional Water System Revenue Bonds, and proceeds
of additional loans from the State Water Resources Control Board

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Water System Financial Overview‒
Strong Operating Results & Financial Metrics
Debt Service Coverage (Min 1.7x) Days Cash on Hand* (Min 150 days)
2.5 300

250
2.0 200

150
1.5 100

50
1.0 0
2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017

Debt to Capitalization Ratio (Max 65%)

70%

65%

60%

55%

50%
2012 2013 2014 2015 2016 2017

* Prior to FY2016 the Board Approved Financial Metric for Minimum

cash balance was $200 million. 21
 Water System Conservative Debt Profile
Water System Debt Repayment Profile* Debt Composition

Total Debt: $5.245 Billion:

 Includes $150 million note from
*Excludes $150 million Note from Revolving Credit Agreement
Revolving Credit Agreement and $544.8
Water System Credit Ratings as of March 15, 2018 million of State Loans.
Bond Ratings Long-Term Outlook
Standard & Poor's AA+ Stable  No interest rate swaps or auction rate
Moody's Investors Service Aa2 Stable securities; VRDB bank facilities extended
Fitch Ratings AA Stable with staggered expiration dates from
_______________________________________________________________________________________________
Note: Debt outstanding as of January 1, 2018. Excludes interest subsidy for BABs.
2019 through 2021. 22
 Bond Security Legal Protections
Power Water

Source of Payment: Power and Water revenue funds are separate funds
established by City Charter in the City Treasury under the control of Board of  
Commissioners.

Rate Covenant. Board sets rates and charges, subject to approval of City
Council as mandated by City Charter, to provide revenues that together with
other available funds shall be at least sufficient to pay debt service and operating  
and maintenance expenses.
Additional Obligations. Adjusted net Income for any 12 consecutive months
within 18 consecutive months ending immediately prior to issuance of Additional
Parity Obligations shall be at least 1.25 times the Maximum Annual Adjusted  
Debt Service on all Parity Obligations including proposed bonds.

Transfer to the City. May not exceed the net income of the prior fiscal year
or increase Power System debt to total capitalization to exceed 75%. 
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LADWP Is Committed to Meeting
Operational Needs and Financial Goals
• Diverse power and water sources
• Meet or exceed all regulatory commitments
– Power: RPS, carbon reduction, other environmental
– Water: quality, safety, sustainability, environmental
• Continue investing in Water and Power System reliability
• Maintain competitive retail rates and financial stability
• Improve customer service

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 Upcoming Financing Transaction

Power System: Up to $415.7 M refunding

transaction in March 2018*
 Serial bonds maturing from July 1, 2019 –
2038
 Par call in 2028
 Expected to price the week of March 26, 2018

*Preliminary Subject to change

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